Commentary on the Politics, History and Culture of the Middle East and Central Asia, by Brian Ulrich

Saturday, March 23, 2013

Waqf Management

Waqf endowments (awqaf) are an important part of the history of both the Middle East and other parts of the Islamic world. They are a source of wealth set aside in perpetuity for a specific religious purpose. In perpetuity historically meant that they could not be taxed or confiscated, and ideally in the Islamic worldview all wealth would thus be set aside for God's work.

By at least the 1200's and into the Ottoman Empire, they had become widely used as a tax shelter and way to preserve wealth within a family despite the danger of falling out of favor with the various regimes. In particular, the endowments needed someone to manage them, and it was common to simple name your descendants waqf managers with generous personal allowances. Because of this, by the early 1800's, huge percentages of Middle Eastern wealth were tied up in these endowments, one reason why the financial difficulties of the Ottoman state did not mean the empire as a whole was impoverished. Because of this, both the imperial government and Egypt, which was functionally autonomous began finding ways to take control of waqf revenue.

This is historical context for this article about awqaf in the modern world:

Over the past few decades, as Middle Eastern populations have grown and
the Gulf’s oil industry has boomed, awqaf have amassed a vast array of
assets, from real estate to cash holdings, equities and even valuable
books.

But the management of these assets has failed to keep up with their
expansion; money is often tied up in property or bank deposits that earn
miniscule or even zero returns, analysts of the industry say. That
imposes a heavy economic cost on a region which is struggling to boost
private sector growth...

There is little data on the extent to which endowments’ returns lag
professionally managed funds, because the vast majority of awqaf do not
disclose full financial figures. But since awqaf have traditionally been
run mainly by administrators rather than return-maximizing investment
managers, the underperformance is believed to be considerable.

There are signs this situation will change, however, as professional
investment firms, sensing a business opportunity and encouraged by the
growth of Islamic finance during the global credit crisis, offer their
services to awqaf - in some cases with the encouragement of governments
which want to energize the sector.

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About Me

I am an Associate Professor in History at Shippensburg University, where I teach courses in Middle Eastern and world history. My two major research areas are the Middle East from the 7th through 10th centuries and the Persian Gulf from ancient times to the present. Nothing on this site represents an official position of Shippensburg University.